“Lower sales in China, primarily for construction equipment.”
Buried at the bottom of its earnings release on Thursday morning, global industrial equipment manufacturer Caterpillar hid this warning about China, the world’s second-largest economy which has seen growth slow to its slowest pace in 25 years.
The company is also forecasting that while the economy will grow at a slightly faster clip in 2015 than it did last year, this growth will not be coming from emerging markets or China.
In a release, the company said:
Overall, our view of world economic growth in 2015 is about the same as we expected in the outlook provided with our 2014 year-end financial release in January of 2015. We expect world GDP growth in 2015 of about 2.7 per cent, up from about 2.6 per cent in 2014. We expect that the improvement will come from developed countries and that economies in developing countries will, overall, grow at a rate slightly below their growth rate in 2014.
Caterpillar, which is seen as a bellwether for global economic growth, reaffirmed its revenue outlook for the year, and said it expects global GDP to grow 2.7% this year, up from 2.6% in 2014.
The company added:
Despite our outlook for modest improvement in global economic growth versus 2014, significant risks and uncertainties remain that could temper growth in 2015. Political conflicts and social unrest continue to disrupt economic activity in several regions; in particular, the Commonwealth of Independent States, Africa and the Middle East. The Chinese government’s push for structural reforms is slowing growth, and the ongoing uncertainty around the direction and timing of U.S. fiscal and monetary policy actions may temper business confidence.
Overall, however, Caterpillar’s first quarter came in way better than Wall Street analysts expected, with earnings per share hitting $US1.86 against expectations for $US1.35, while revenue hit $US12.7 billion topping estimates for $US12.6 billion.
Shares of Caterpillar were up as much as 4% in pre-market trade on Thursday.
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